Dominican Republic Inflation

Dominican Republic: Inflation picks up in May while Central Bank cuts rates

June 11, 2013

In May, consumer prices fell 0.18% over the previous month, which was down from the 0.06% drop seen in April and marked a second consecutive monthly fall in prices. The reading was driven by lower prices for food and non-alcoholic beverages as well as for clothing and footwear.

Despite the negative monthly reading, annual headline inflation inched up from 4.9% in April to 5.0% in May. At the current level, inflation sits within the Central Bank's target of 5.0% with a 1.0 percentage point tolerance margin.

Meanwhile, at its 26 May meeting, the Central Bank cut the monetary policy rate by 75 basis points to 4.25%, which marks the first rate cut since August 2012. The Central Bank sees moderate inflationary pressures going forward and therefore decided to profit from the favourable inflation scenario in order to provide a boost to dwindling domestic demand.

FocusEconomics Consensus Forecast participants expect inflation to end the year at 5.7%, which is unchanged over last month's projection. For 2014, panellists anticipate that inflation will moderate to 4.7% by year-end.